Although several property/casualty insurers spent time this week congratulating themselves on remaining strong in a down economy, Wachovia said on Thursday that these insurers may well report lower investment income in the fourth quarter. Further, notes Wachovia, the industry will be hurt by additional catastrophe losses from worse-than-expected hurricane activity earlier in 2008.
As reported by Reuters, according to an estimate from Munich Re on Thursday, total insured catastrophe losses in 2008 rose to about $45 billion—about double 2007 levels, and the third-costliest year on record.
Robert Hartwig, president of the Insurance Information Institute, told attendees at the forum that insurers representing all lines of business will absorb about one-fifth of the financial losses globally. Hartwig was quick to point out, however, that investment losses will not jeopardize insurers’ solvency.
In a note to clients, Wachovia said that insurers with large investment portfolios could be among the worst hit in the quarter.
Allstate, Chubb and Travelers are among those companies that will release quarterly results by the end of January. According to the Reuters report, Wachovia cut its fourth-quarter earnings outlook for 12 insurers, including Allstate and Everest Re Group Ltd (RE.N). However, the brokerage expects policy rates to start going up as the year progresses, creating underwriting opportunities.
"Private reinsurers should have an opportunity to write more business in Florida at the June/July renewals," Wachovia said in its report, adding that the tough credit environment made it difficult for the Florida Hurricane Catastrophe Fund to raise enough capital to fully back its expected 2009 capacity.
Ace Ltd, EverestRe and PartnerRe Ltd. were named as Wachovia’s top picks. According to the report, Wachovia said Ace is attracting business from insurance buyers seeking stable carriers, citing the financial woes of American International Group Inc., XL Capital and Hartford Financial Services Group Inc.
